Breaking News - Solar Credits Scheme Slashed Again! - 5th May 2011

The Minister for Climate Change and Energy Efficiency, Greg Combet, today announced adjustments to the Solar Credits arrangements in light of continued strong growth in the industry, the impact of this on electricity prices, and the impact of the Solar Credits support on demand for other clean energy technologies such as solar hot water heaters.

The additional Solar Credits support under the bipartisan Small-Scale Renewable Energy Scheme (SRES) will be reduced to a multiple of 3 rather than 4 on 1 July 2011.

“Strong demand for solar panels has continued, fuelled by declining system costs, the strong Australian dollar and economy, as well as incentives such as Solar Credits and the State and Territory feed-in tariff schemes. The generous support for solar panels has also contributed to a decline in the installation of solar hot water heaters,” Mr Combet said.

“By taking this action the costs of the SRES on electricity users are likely to be around half of what they otherwise would be in 2012, while at the same time still providing considerable support to households taking action on climate change,” he said.

From 1 July 2011, the Solar Credits multiplier will provide households with upfront support equivalent to around a third of the out-of-pocket costs for a typical 1.5 kilowatt (kW) solar panel system, before taking into account ongoing electricity cost savings and any State or territory based feed‑in tariff incentives.

“The changes announced today will continue to support households, small businesses and community groups with the upfront cost of installing solar panels, while also helping to moderate market demand and placing the industry on a more sustainable development path,” Mr Combet said.

Action on electricity prices

The reduction of the Solar Credits multiplier is consistent with a number of actions the Government is pursuing to help ease the pressure of rising electricity prices. These include:

• A review of the network regulatory regime by the Australian Energy Market Commission (AEMC) to ensure we have an appropriate balance between reliability and cost to the community (noting that network costs constitute around half of household bills and have been the predominant factor in recent electricity price rises);
• Investigation of better demand side participation and energy efficiency by the AEMC which provides opportunities to reduce the growth of peak demand which has contributed to the rising network costs;
• Providing carbon price certainty to the energy sector to avoid inefficient and short-term investments that will cost Australians more in the long term;
• The commitment to use over half of the carbon price revenue to assist households with any price impacts of the carbon price mechanism, ensuring millions of Australians will be better off; and
• The implementation of the National Energy Customer Framework with specific provision for customer hardship.

The Government also intends to work with State and Territory Governments to ensure that feed-in tariffs are consistent with the COAG agreed principles on feed-in tariffs and do not impose an unjustifiable burden on electricity consumers either through cross-subsidy mechanisms or their impact on the SRES.

Solar Credits changes and sustainability of SRES

The Solar Credits mechanism provides support for those installing small‑scale solar panels, wind and hydro electricity systems by multiplying the number of certificates that these systems would usually be able to create under the Renewable Energy Target (RET) scheme. Solar Credits applies to the first 1.5 kilowatts (kW) of system capacity installed for systems connected to main electricity grids and up to 20 kW of capacity for off‑grid systems.

The Solar Credits multiplier from 1 July 2011 will be reduced to three, and to two on 1 July 2012 and then be reduced to one on 1 July 2013.

It is intended that existing written contracts to install small-scale solar panels, wind and hydro electricity systems, made on the basis of a Solar Credits multiplier of four and where a deposit had been paid prior to today, will be preserved. Transitional arrangements will be put in place to ensure the level of support provided through the SRES is maintained according to the current regulations.

After 1 July 2013, small-scale systems and solar hot water heaters will still be supported by the SRES which is legislated to operate in parallel to the Large-Scale Renewable Energy Target until 2030. This support for large-scale and small-scale renewable energy is an important complementary policy to a carbon price in delivering a clean energy future and deploying our significant renewable energy resources.

The reduction in the multiplier will help reduce the oversupply of certificates which is currently suppressing the certificate price in the SRES, but any excess certificates created this year will be added to the 2012 liability consistent with the requirements of the Act. The $40 price which operates in the clearing house will not be reduced by these changes.

The SRES will be subject to a statutory review in mid 2012, and every two years thereafter, to ensure that it is operating effectively and provides a sustainable framework for the solar panel and solar hot water heater industry.